Daily Market Update 22 January 2014 - BHP, CPI and the PBoC to contend with

Daily Market Update 22 January 2014 - BHP, CPI and the PBoC to contend with

As had been flagged last week, the IMF upgraded their global growth forecasts for 2014 overnight with the group now expecting global GDP to expand by 3.7%, up 0.1% from the previous estimate offered in October 2013. Of the major economies the United States is expected to grow 2.8%, an increase of 0.2% from the prior estimate, the Eurozone +1.0%, up a smidgen from 0.9% previously, while China, the second-largest individual economy globally, is now expected to see growth of 7.5%, an improvement of 0.2% on October.

Employment across OECD states, expressed as a percentage of working age population in employment, rose fractionally in the third quarter of 2013 with an increase of 0.1% to 65.2% reported. While overall employment pushed higher, it was a different story for Australia with the ratio falling to 72.0%, down 0.3ppts from the 72.3% reading struck in Q3 2012. To read the report in full, click here.

Expectations for the German economy fell unexpectedly during January with the closely-watched ZEW survey slipping to 61.7. While below forecasts for an increase to 64.0, the reading was only fractionally below the multi-year peak of 62.0 hit in December 2013. While expectations soured, showing that the economy continues to improve, the current conditions index rose strongly, printing at 41.2 against expectations for an increase 35.0. The reading was well above the 32.4 figure of December and was the highest level seen since May 2012.

UK manufacturing orders fell unexpectedly in December with the CBI industrial trends survey falling to -2 during the month. The reading was well below the +12 reading of November and expectations for a decline to +10 and was the lowest level seen since September 2013. Export orders, down heavily to -16 from +11 previously, was the chief catalyst behind the decline, offsetting improvements in both output and average selling prices for the month.

The Day Ahead (All times AEDT)

The ASX 200 looks set to ease lower this morning with SPI futures pointing to a decline of 7pts on the open. Things to look out for today include BHP’s fourth-quarter production report released before the market open, Q4 CPI out at 11.30am along with any additional liquidity operations from the PBoC which will be announced just after Midday AEST.

The AUDUSD largely range traded overnight with the pair operating between .8776 and .8826 throughout European and North American trade. While there were few catalysts to drive direction overnight, we’ll certainly get a big one this morning with the release of Q4 CPI at 11.30am. Should we get a core reading above +2.3%, expect traders to target stops layered above the .8838 level. On the flipside, should the number come out at-or-below expectations, something we feel markets have largely discounted following the Kiwi CPI yesterday, expect the pair to sink with the first port of call likely to be the .8757 level.

Australian Q4 CPI will be released at 11.30am this morning. Economists expect prices to have risen +0.4% over the quarter, a result that will leave the year-on-year rate +0.2% at +2.4%. While the headline figure will garner initial attention, all eyes in the market will be on the ‘core’ reading, that which strips out volatile items that can skew the index, with a quarterly increase of +0.6% expected. Should this eventuate it’ll leave the year-on-year rate near the bottom of the RBA’s target band at +2.3%. While CPI will have the largest impact on markets, the Westpac-MI consumer survey for January will also be released at 10.30am.

The Bank of Japan will announce their January monetary policy decision at some point during today’s trading session. While it’s unlikely they’ll announce any additional easing measures at this meeting, markets will be paying close attention to any signs that this may well occur in the meetings ahead.

Data releases this evening include unemployment and public sector borrowing figures from the UK, Italian current account along with Q3 government debt ratios for the Euro-area. On the policy front, the Bank of Canada will announce their January monetary policy decision in the early hours of tomorrow morning.

Ebay and Netflix headline what is a busy US Q4 earnings calendar this evening.